Gross National Letdown

Published: October 29, 1992

President Bush smiled when he learned this week that economic growth during the third quarter reached a surprising 2.7 percent, almost twice the previous rate. But his smile shouldn't be broad. The new figure almost certainly exaggerates the health of the economy, which continues to creep along at a painfully slow pace.

Even the 2.7 figure is half the normal rate of recovery and not enough to bring down unemployment. And there are plenty of reasons to question whether the third-quarter pace will continue. Part of the uptick was due to an aberrant surge in defense spending, another part to consumers drawing down savings at an unsustainable rate. And the figure may well be revised downward once the Commerce Department checks its technical procedures for handling inflation.

So after scouring the new data, what picture emerges? The economy is growing, but barely. Unemployment isn't likely to fall very much. Wages will probably continue to stagnate.

The picture isn't alarming, but neither is it encouraging. Unless the fourth quarter produces dramatic improvement, the first order of business for the new Congress will be to stimulate the economy with a package of temporary tax cuts and accelerated infrastructure investment. The package will have to be big enough to matter, but self- liquidating so that Wall Street need not fear a substantial increase in the Federal debt.